As an Evangelism Coach, I am frequently asked, “How do I start a ministry?” Today, we are going to talk about how to start a 501c3 non-profit organization in the United States and we are joined by Wes Carter who is an attorney with Winters King Incorporated.
In order to accept donations in the United States, it is important for ministries to be incorporated as a 501c3 organization. When I started my ministry, the law offices of Winter’s, King, and Associates helped me with the paperwork. Today, Wes Carter who is a lawyer with Winter’s, King and Associates will explain the legal process for starting a non-profit organization.
Questions for Wes Carter:
What is a 501c3 organization?
Why is it important for ministries to be incorporated as a 501c3 organization?
What is the process for starting a 501c3 organization?
What information should be in a ministry’s Articles of Incorporation?
What is the difference between incorporating at the state level and securing a 501c3 designation from the IRS?
How much does it cost to incorporate? For incorporation, Winters King charges a flat fee of $950. Then depending on what form is filed with the IRS, securing 501c3 status costs between $1200-$2500. So the whole process can cost between $2,500-$4,000.
How long does the process take?
Once an organization is incorporated, what are the requirements for the organization to remain in compliance with the law?
What are some of the things a 501c3 organization can do, and what are some of the things they cannot do?
Contact Number for Winters King Incorporated: 918-4946868
If you need coaching in starting your ministry, please talk to Evangelism Coach Daniel King.
Evangelism Coach Daniel King (00:00):
As an evangelism coach I’m frequently asked, how do I start a ministry today? We’re going to talk about how to start a 501c3 nonprofit organization in the United States. And we’re talking to West Carter who is an attorney with winters King incorporated, an organization that has set up thousands of 501c3 non-profit organizations.
Evangelism Podcast Host (00:27):
Jesus said, go into all the world and preach the gospel. Everyone who calls on the name of the Lord shall be welcome to the evangelism podcast with Dr. Daniel King, where Daniel interviews, full-time evangelists, pastors, missionaries, and normal everyday Christians to discover how they share their faith, their powerful testimonies and amazing stories that will inspire you to reach people with the good news. And now here’s your host, missionary and evangelist Daniel King. Welcome to the evangelists
Evangelism Coach Daniel King (01:06):
In podcast. I’m Daniel King, and I’m excited about telling people about Jesus. One of the questions I’m frequently asked by people who are starting out in ministry is how do I start a 501c3 organization in order to accept donations in the United States? It’s important for ministries to be incorporated as a 501c3 organization. And so when I started my ministry, the lawyer’s office that helped me out with all the paperwork and applying for that status was winters King and associates. And today we have a lawyer West Carter who is with winters King and associates. And he’s going to explain the process of starting a nonprofit organization, Mr. West, thank you for being here today. It was my pleasure. So let’s start out by answering the question. What is a 501c3 organization?
Wes Carter (02:03):
A 501c3 organization is just what the people call the someone who’s tax exempt. So they’re not, we’re talking about a federal income tax exemption, which essentially means that you’re usually a corporation, but on top of that, you also have a special tax status with the IRS that allows you to take tax deductible donations, as well as you can have an exemption from income tax. So you’re not paying income tax at the federal level for, you know, what money you bring in in this case. Usually donations ties offerings. Usually it also means you’re exempt on the state level as well. Although some, some States you have to file a separate income tax exemption with the state.
Evangelism Coach Daniel King (02:46):
Okay. So winters King and associates is a lawyer’s office here in Tulsa, Oklahoma, and you guys have helped thousands of organizations file for the 501c3 status. And so you guys are experts at every time I talk to people here in the Oklahoma area about doing fiber ones. They always say, I talked to winners King and they helped me out. And so you guys have been responsible for helping out a lot of people. Do, do you help people in other States as well?
Wes Carter (03:18):
Well, we do. And actually it’s just winters and King ain’t now it was winter’s King associates, I think when we set yours up. But yeah, so we, we, we do a lot of this. We’ve been doing it since the early eighties and we have, you know, we have clients in all 50 States a whole, a whole bunch of different foreign countries. Obviously we don’t set them up and foreign countries, but we have people that go into foreign countries or we have attorneys we work with in other countries to help set those up as well. So it is something that we can talk to people about in all 50 States. So
Evangelism Coach Daniel King (03:48):
Why is it important for ministries to be incorporated as a 501c3 organization?
Wes Carter (03:53):
So that’s a great question. So, you know, there’s a lot of specially in the last couple of years, people who would prefer to avoid as much legal formality as they can for various reasons. But the incorporation part is very important because without it, all we have is a group of individuals. So if you and I are running a ministry, we don’t have a corporation, then it’s just you and I, the people out there running a ministry, and if anything goes wrong, nobody’s there to Sue except you and me, the individual. So what one of the best benefits of having a corporation is that you have a separate legal entity there that operates the activities that separate entity then provides some separation and protection so that if the ministry has a debt or get sued, then you’re not responsible for the debts, the liabilities in the ministry, just because you might be the founding minister or on the board or one of those things.
Wes Carter (04:49):
So the, probably the best way it provides a benefit to you as the minister or the missionary or pastor, is that, you know, it protects the people that are involved from a, from a personal standpoint. And also it allows you to keep everything separate. The people I run into that are especially missionaries or itinerant ministers, they’re taking donations or putting in their personal checking account. And then they have to count every penny that comes in as income, and they’re trying to write off expenses. And so it gives you somewhere where you can keep everything separate here. This is the ministry stuff for the churches stuff. This is my stuff. And so that becomes very important too, because the more you mix the two, it just, all kinds of things can go wrong.
Evangelism Coach Daniel King (05:33):
And then another benefit is giving the tax deductible receipts. What, how does that help people?
Wes Carter (05:39):
So, you know, if I make a donation to your ministry, most people expect that they’re going to be able to write that off on their, on their tax returns. You know, they get a deduction on their personal tax return. And so that’s one big benefit because you know, your $5, $10 people may not be that big of a deal, but once you start getting large donors, it becomes a big deal for them or corporate donors. They, you know, they want to do that. Also, if you deal with any kind of private foundations, they’re limited to only giving to 501c3 organizations. And if you start getting where you’re sharing resources or getting support from other churches and ministries, they have to be very careful and almost, you know, never can give to for-profits because we can’t just take our non-profit money and give it to a for-profit. So by having a 501c3, then you’re opening all those doors as well. Also having your 501c3 comes in handy with a variety of vendors. I mean, if you want a nonprofit PayPal account, or if you want nonprofit postage rates, I mean, all those things are kind of based on your 501c3 status. So, you know, it provides benefits in a number of areas.
Evangelism Coach Daniel King (06:48):
So what’s the process for starting at 501c3 organization.
Wes Carter (06:55):
So I like to think of it basically in two phases. Okay. Phase one, we have to set up the corporation itself, phase two, we look at applying to get your 501c3 status with the IRS. Phase one, you’re looking at essentially filing articles of incorporation with your home state to create the entity, get you a taxpayer number. What’s called an employer identification number a lot, bill called an EIN. And then we’re doing bylaws, which are perhaps the, one of the most important governing documents. And you know, your first set of minutes, those kinds of things put together the corporate book. Now you have a, an entity that’s up and running. You can take those documents to the bank, open a bank account, have a separate bank account to deposit the money. And that’s kind of phase one. Now there are other little side issues.
Wes Carter (07:44):
Sometimes you’re dealing with in phase one, like I said, sometimes varied on the state, filing a little income tax exemption with the state, or some States require you to register what they call charitable solicitations registration, where many States exempt religious organizations. But it’s always something to look at. See if you have to register with the attorney and journal that as a charity, the second phase then is applying with the IRS. And there’s a number of nuances there, but generally speaking churches are inherently exempt as a 501c3. If you meet the IRS criteria of a church, the main ones being regular worship services, your services are open to the public. All your, your whole congregation is not all family and it’s not all cousins and aunts and uncles. Then you’re having inherent exemption as a 501c3 without even applying.
Wes Carter (08:36):
Now, again, those other benefits, the, the corporate corporate, well, the other benefits of having 501c3 status, the, you know, the, the, the nonprofit vendors, the, the taxes I’m trying to state level, there’s still reasons why it’s always usually a good idea for a church to go ahead and get 501c3 status by applying and getting in the IRS is, you know, list of [inaudible] ministries. Don’t have that ministries. You’re not a 501c3 until the IRS says you’re a five Oh one C3. So with ministries there are now two applications you can use. One’s the form, 10 23. And then they have a form 10 23 EZ. Now the easy version, the biggest hurdle usually is you have to be able to say that you don’t project to go over $50,000 in revenue in any one of your first three years. So it’s designed for smaller organizations the filing fees, the attorney’s fees, everything’s lower on the easy application. And then they have the regular 10 23, that all that has been updated. It’s been the same form that you’ve used for decades to file for your 501c3 status.
Evangelism Coach Daniel King (09:42):
So a church receives 501c3 status. They, they, they, they meet the criteria for it, but then a ministry that is like a para-church ministry, a ministry that maybe is doing missions, or maybe is, is feeding the poor, something like that. They would need to apply in order to, to, to get the status,
Wes Carter (10:06):
Correct. They have to apply and the church can apply. The IRS has a portal now where you can go online and search exempt organizations, look, people up, which people are starting almost like a Google, a business, you know, to look up the reviews, they’re looking it up to see if you’re really exempt. And again, corporate donors, if you start working with schools and things like that as a church, there’s a variety of reasons why we usually advise clients to go ahead and file for your 501c3.
Evangelism Coach Daniel King (10:29):
What criteria is the IRS looking for to see if an organization should qualify for the status
Wes Carter (10:38):
For just 501c3 status. So they’re looking to make sure you’re organized correctly. There’s some specific language you have to have in the articles of incorporation that talk about, you know, you won’t engage any improper, private benefit was just means, you know, you’re not using non-profit resources to benefit individuals that unless they’re, you know, part of a charitable class that you’re not gonna engage in political activity, that if you dissolve, which is the legal term for killing off a corporation, if you dissolve the corporation, go away, you’re required to donate all of your property to another 501c3. So it stays being used for a charitable religious purpose.
Evangelism Coach Daniel King (11:13):
So it’s a, it’s a public corporation. And usually it would be, or always, it would be governed by a board rather than an individual. Well, what are some of the criteria you should look for in appointing board members?
Wes Carter (11:31):
So it’s a great question. And as I mentioned, your bylaw, your articles of incorporation are typically there’s things that have to go in there. And they’re just, you know, there’s not a whole lot of extra things you add in your bylaws are where all the nuts and bolts are. And one of the most important thing is your, your, your board. So even though it’s run by a board, one of the things we often talk to our ministers is setting it up as a founder, strong or pastor strong setup, which, which I re you know, kind of just my terminology I use, but where we let the minister appoint and remove the board members. And that way the minister can make sure that they don’t lose control of their own organization. So with that being said, you know, my advice usually for how to pick the board members is you want someone who usually has their own thing going on that they’re, you know not necessarily take the risk that they decided they’re going to do this better than you can that is going to support your vision.
Wes Carter (12:33):
But also you don’t want a bunch of us people on there. I mean, you want people who will question, call you out if they think there’s a concern, but then with you as the lead visionary as the lead minister, once the decision’s made, then, you know, they’ll, they’ll get behind you and still support you, but you don’t want people who are just going to say yes to everything, because that’s just not healthy, you know? Yeah, no, one’s perfect. The more, the more ideas, the more, you know, wisdom we can get in the room, usually the better decisions we’re going to make. So those are kind of the, the, the qualifications for the board members. I mean, because they can run the gamut where it’s friends, other ministers on the board, people who are involved in the ministry itself you know, so, but a lot of times it comes down to the individual people, but you do want to be very careful.
Wes Carter (13:22):
And if you end up with an organization where the board appoints and removes itself, by email, by majority vote, then those items become drastically more important because you have the risk of, you know, 10 years down the road after you’ve built this up with your blood, sweat, and tears and prayers that, you know, someone votes one day that they just don’t need you anymore. And they’re going to go on without you. So you know, picking the board members are very important but it’s really people who are going to support you, but not pander to you, I guess, would be one way to put it.
Evangelism Coach Daniel King (13:55):
Is there a minimum number of board members you need to have
Wes Carter (13:58):
A minimum of three. The IRS likes to see these days, they’ll strongly encourage us to have at least half not be in the same family. But we need at least three members.
Evangelism Coach Daniel King (14:10):
How much does it cost to incorporate and then apply for the 501c3 designation from the IRS?
Wes Carter (14:18):
Well, what we do since we do so many of these, what we do is we charge a flat fee. So for the incorporation process, we charge a flat fee of nine 50 for the attorney’s fee plus whatever the filing fees are with the state, which vary from state to state.
Evangelism Coach Daniel King (14:31):
So the incorporation happens at a state level, correct. And you incorporate in a state. So my organization King ministries is incorporated here in the state of Oklahoma. Does Oklahoma have filing fees for being a corporation?
Wes Carter (14:49):
Yeah. And so in Oklahoma, we’re usually at about $75 as what, cause they have a filing fee and then they have an online fee. They tack on top of it. But usually we’re looking at about 75. Then they range anywhere from $25 up to $200 is probably the max I’ve. You know, if we got to look at all the States. So
Evangelism Coach Daniel King (15:09):
And so it’s at the incorporation level that you are writing the bylaws, explaining the purpose of the organization, establishing what it’s going to do. What are some of the recommendations that you make for the bylaws, what needs to be in there?
Wes Carter (15:27):
So the bylaws are going to have your tenants of faith, which for religious organization, I believe is very important to have that in black and white. Sometimes those tenants of faith will include statement on instance, marriage and sexuality. You know, some of the hot button topics. We mentioned the board, probably one of the most important ones, how the board members are elected or appointed how they’re removed your officers. Usually you have a president, secretary, treasurer, and a corporation. A lot of times, those are the same people as the board, but you just have to understand those two different hats. So, you know, if there’s three of us were three of us were on the board, your president, I’m secretary he’s treasurer, we’re all three of the same people, but we’re serving in two different roles, the board and the officer. So the officers also have provisions on how they’re appointed and removed.
Wes Carter (16:12):
So for instance, if the senior pastor is the president, you’re looking at not only how’s the senior pastor mood as a board member, but how is the senior pastor removed or appointed as an officer as well? Cause you can have a situation where I remove you as president, but you have a lifetime service on the board, but you know, you lose half of your power. All, you know, now you’re just a board. You’re not seeing your pastor anymore. You’re just a board member. Usually we have a, you know, talk about conflict of interest policy so that we’ve got a transaction where one of us have a financial interest in it. How do we work through that process? We have a lot of these things are things that are unique to our bylaws are unique to religious corporations, but for instance, how we’re going to use our facilities in a scriptural way, you know, some, some language about not using our people or our stuff in a way that would contradict our tenants of faith to help guard against, you know, things that, you know, trying to guard against obligations, where we’re going to have to hold a Vince, for instance, at our building that will completely go be, you know, against our, one of our beliefs.
Wes Carter (17:18):
So it’s, it’s, it’s things like that. How the hollow bylaws are amended. If, if it’s a church, many times we’ll address ordination in the bylaws, you know, that we give the church the power to ordain other ministers. But really the things that, you know, when you’re starting it up, if, if you get bylaws you’re reviewing or an attorney or someone gives you bylaws, I would say the first two places to start there, the most important are what the, the board and the officers because I’m guessing that you already have a tenants of faith that you’re comfortable with.
Evangelism Coach Daniel King (17:53):
So to incorporate you guys charge $950 flat fee. And so that’s at the state level, but then after you’ve secured your incorporation at the state level, then you have to apply to the, the IRS, the internal revenue service for the five Oh one C3 designation so that you can give tax deductible receipts. So talk me through that process after you secure that incorporation, then what happens?
Wes Carter (18:22):
So after you get incorporated, then the way we do it is we have a questionnaire that we have you fill out and then we take all that information, review it, reword it, take words, you know, buzzwords in and take buzzwords out that kind of a thing and fill out the application itself. And again, depending on which application you use, the easy version for smaller organizations is only a couple pages long. The regular application can be, you know, dozens and dozens of pages long. So you know, that process looks like essentially you filling out a questionnaire to get us answers. I mean, there’s a lot of questions on the regular 10 23, about how you approve compensation, your budgets are you operating in foreign countries? You know, just the whole gamut of the activities that you can expect every year. They just get a little more complicated with these forms.
Wes Carter (19:17):
And if we use the easy application, what we do is we go ahead and give you our full questionnaire. It’s actually a little bit longer because we have to make sure you qualify for the easy we review all of that information on the front end to look for. Cause what part of what we’re doing is looking for red flags saying, Hey, Daniel, you shouldn’t do it this way before we file. We need to change this, you know, your, your, the way you’re selling your books through your ministry that you own. Personally, we need to tweak this a little bit. And we go ahead and do all of that and review it. We just don’t give any of that information to the IRS. We use the simplified application and use the shorter version. So then we fill out the forms we apply. We send in the application to the IRS, they’re all online.
Wes Carter (19:55):
Now we submit them online beginning of this year. And then we wait. The IRS over the years takes anywhere from 30 days to 18 months. You know, right now probably averaging about four or five months on the regular applications from when we hear back after we file. We’re probably one thing that’s important for your listeners to understand is the way the process works is as long as you file your 10 23 application, your 501c3 application within 27 months. So when you incorporate, you know, that date, we’ll talk about filing with the state. You don’t want to wait that long, but that’s the maximum. If they approve the application, they’ll make your 501c3 status retroactive back to your date of incorporation, which means once we start, your ministry can take anywhere from a couple of days to a week or two at the state level, you can start doing ministry activities, taking donations, having events, things of that nature while we’re waiting on the IRS to process the application. Because as long as they approve the application, it’s going to be, everything’s gonna be retroactively tax deductible to your donors and tax exempt from an income tax standpoint. So you can
Evangelism Coach Daniel King (21:09):
Start ministering. You don’t have to wait for everything to finish, to start ministering, correct. You get in the process, you can start ministering and once you are approved, then you can go back and give a letter to your donors saying that they get it
Wes Carter (21:25):
Right? So this time of year it’s easier because hopefully we get everything wrapped up. By the end of the year, when we transitioned between two calendar years for tax purposes, then we just have to be a little careful what those receipts look like, because we don’t want to be dishonest with our donors obviously, and say, we are a 501c3 on the receipts for the donations, but rather we explain we’re in the process of applying when it’s approved, it’ll be retroactively deductible. So they still have a contemporaneous document of that. They gave a donation. So things still try to claim it on the taxes. How long does
Evangelism Coach Daniel King (21:56):
The incorporation at the state level typically take our States faster than the other?
Wes Carter (22:00):
Oh, much faster. Some States are slow, but most States like Oklahoma. If I file articles, I usually have it back by the next day. Most States are a couple of days. The RFU States where you still mail stuff in, so it can take a couple of weeks, but a couple of weeks is still much faster than what you’re looking at with the IRS.
Evangelism Coach Daniel King (22:17):
So the incorporation can take days, but the, the 501c3 from the IRS could take a month, several months up to 18 months, you said so. Yeah. And you just have to be patient
Wes Carter (22:31):
Exactly. Because once you file it, you thought of your hands. There is an expedite process, but the bar bar so high to use it that it’s I’ve only even thought we had a chance to use it once out of the thousand. Okay. I mean, you basically have to be able to show that if they don’t exploit your application, your organization will be dead by the time they get to it.
Evangelism Coach Daniel King (22:50):
So once an organization is incorporated, they’ve secured the 501c3 designation. What are some of the requirements for the organization in order to remain in compliance with?
Wes Carter (23:02):
That’s a great question. So most 501c3 is have an annual report. They filed with the IRS called a form nine 90. So that’s it. You don’t have to file a tax return, but you file an annual informational return. Not very important to file. There’s a few versions of that, again, depending on your level of revenue, how much money’s coming in. But if you don’t file that for three years in a row, they will revoke your 501c3 status. You’ll have to go apply again to get it back. Now churches are exempt from that. The common theme hitters churches are special. But churches do not file a 990. So if anyone out there is wondering, look, I’m going to be a church and a ministry, which ones should I be? The is always get church status if you qualify for both, because they also have special audit protections.
Wes Carter (23:51):
The IRS has to jump through some very specific hoops to audit a church. So not filing a nine 90 is something particular to churches in the religious world. Outside of the IRA. Now you also have your taxes. So from a tax side, and if you have employees, you have to follow your employment tax filings and things like that. Or we’re just talking at the corporate level here at the state level you could have an annual report to file at the state level as well, depending on the state we talked about some States have a charitable solicitations registrations where basically the attorney journal once charities to register with it. So he knows, or she knows that they’re around and out there. But many religious organizations are exempt from that as well at the state has an annual report. You know, like with the secretary of state, the corporations, part of the bureaucracy, most of the time nobody’s exempt from that most of the time, you know, everyone’s filing the annual report. If that’s part of the state process,
Evangelism Coach Daniel King (24:49):
Does Oklahoma have a annual report? No.
Wes Carter (24:52):
Nope. Nope. There is a little bit of an annual tax thing where he shows you a fire lines, but Oklahoma, Oklahoma is a very easy place to do business.
Evangelism Coach Daniel King (25:01):
I like Oklahoma. Yeah. Okay. So your organization, winters King incorporated. Does this process, how can people get in touch with you if they’re interested in, in starting their own ministry or
Wes Carter (25:15):
Sure, sure. You can. You can email us. We have a contact form on our website, which is wintersking.com, W I N T E R S K I N G.com. Or you can just give us a call at (918) 494-6868 (918) 494-6868.
Evangelism Coach Daniel King (25:32):
Well, if you are planning on starting a ministry, I’d encourage you to get incorporated to get your five Oh one C3 status so that you can open up bank accounts so that you can give tax deductible receipts. And so everything is proper and legal for your organization. And Winter’s King did a great job with my articles of incorporation and helping me out. And so I recommend them. So thank you Mr. West Carter for being with us today.
Wes Carter (26:01):
I appreciate it. It’s my pleasure. Thank you for having me.
Evangelism Coach Daniel King (26:04):
God bless you. If this information about how to start a 501c3 organization is useful for you today, could you do me a favor? Go find the evangelism podcast on Apple iTunes and leave us a review. Your positive review will help other people who are excited about evangelism to find this information. Thank you. And God bless you
Evangelism Podcast Host (26:28):
For more information about how to share your faith or to financially support our worldwide evangelistic outreaches. Visit King ministries.com. Again, that’s King ministries.com.